Exam 6: Master Budget and Responsibility Accounting

Nantucket Industries manufactures and sells two models of watches, Prime and Luxuria. It expects to sell 3,500 units of Prime and 1,500 units of Luxuria in 2019.The following estimates are given for 2019: Nantucket had an inventory of 200 units of Prime and 105 units of Luxuria at the end of 2018. It has decided that as a measure to counter stock outages it will maintain ending inventory of 400 units of Prime and 230 units of Luxuria. Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $12. There were 120 units of Crimpson in stock at the end of 2018. The management does not want to have any stock of Crimpson at the end of 2019. What is the total budgeted cost of goods sold for Nantucket Industries in 2019?

Describe the concept of kaizen budgeting.

The sales department in any organization is usually a profit center.

Activity-based budgeting would permit the use of multiple drivers and multiple cost pools in the budgeting process.

Tom Magic Company manufactures various kinds of toys for different age groups. The company's flagship product is Rx. The company currently requires 8.50 labor hours to manufacture per unit of Rx. The company believes that because of numerous small improvements in the process, it will require 0.10 labor-hours less and hence will only 8.40 labor-hours in the next quarter. It will require 8.35 and 8.25 labor-hours in third and fourth quarter. The company has adopted ________.

For next year, Roberts, Inc., has budgeted sales of 20,000 units, targeted ending finished goods inventory of 1,650 units, and beginning finished goods inventory of 750 units. All other inventories are zero. How many units should be produced next year?

Describe the benefits of preparing an operating budget to an organization.

Managers who feel that top management does not believe in the budget are most likely to ________.

Distinguish between controllable and uncontrollable aspects of revenue and costs. Can a manager totally control all revenue and costs? Why or why not?

Advanced Enterprises reports year-end information from 2018 as follows: Advanced is developing the 2019 budget. In 2019 the company would like to increase selling prices by 12.5%, and as a result expects a decrease in sales volume of 9%. All other operating expenses are expected to remain constant. Assume that cost of goods sold is a variable cost and that operating expenses are a fixed cost. What is budgeted cost of goods sold for 2019?

The preparation of all the budgets in the master budget forces managers to think about their business operations and to formulate plans, while:

Responsibility accounting ________.

Duffy Corporation has prepared the following sales budget: Collections are 40% in the month of sale, 45% in the month following the sale, and 10% two months following the sale. The remaining 5% is expected to be uncollectible. Required: Prepare a schedule of cash collections for July through September.

Budgetary slack is the practice of underestimating costs so as to project an optimistic future outlook.

Budgeted production equals ________.

In a multinational company, budgeting is primarily done to evaluate the firm's performance relative to its budgets.

A quality control manager of a golf ball maker is most likely to be responsible for a(n) ________.

The benefit of engaging lower level management in the budget preparation process is that it helps to streamline the budget process.

The major objectives of a budgeting process should include all of the following EXCEPT:

The ________ is a component of financial budgets.